After spending over 20 years in financial services, I learned a great deal about the practices of the wealthy and the practices of most Canadians and Americans. There are many myths about achieving wealth and it may surprise you to learn only a few tactics separate the wealthy from those who struggle, living pay cheque to pay cheque.

The first three posts in this series feature our money beliefs, challenge conventional wisdom in accumulating net worth and hopefully incented you to evaluate your spending habits. In this post I explore the power of fees…the power to erode your wealth if you are not aware.

Fees, Fees, Fees

Wealthy people know where they are spending their money. Fees are no exception. Few Canadians know what fees they are paying – in management fees on their mutual funds or to their Financial or Investment Advisor. And even fewer realize how much investment growth they are losing as a result.

Some investors think they are paying no fees as they do not see any fees recorded on their statements.

Two 22 year olds invested in S&P portfolios of identical quality differing only in fees, could at age 65 have a difference of $3,000,000 in their portfolios. Is this shocking? It should be. (One could have $3,000,000 and the other could have $6,000,000.) That is the potential magnitude and illustrates why fees are so important.

Our American counterparts pay much closer attention to investment fees. As a result, their MERs (management expense ratios) are typically smaller. With pressure from Canadians, there are many more low-fee options than ever before. Our government has been listening. Mutual fund companies are being mandated to report fees in future.

MERs are comprised of management fees, transaction costs, custody costs, marketing fees, legal expenses and transfer agent fees. MERs range from less than 0.5% percent to more than 3%. I personally don’t hold any mutual funds that charge more than 0.4%.Why would I give away my investment returns? What are you paying?

And for those who want someone else to manage their money? The wealthiest still often pay the lowest fees, even when they pay someone else to manage their money. How? They pay careful attention to fees and know where and how to invest. While I manage most of my investments independently, I have given about 25% of my overall investment portfolio to an investment firm. Their fees are tied to the performance of the funds my fees are well below average for above average returns.

Would you like some help deciphering what you are paying in fees? Contact me for a FREE consultation.

More to follow…Join me for the next post in which you will learn how to create an action plan to bring wealth lessons to life.

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Tactics of the Wealthiest 10%

• Differing Beliefs What are your beliefs about money and wealth?
• Where did you learn them?
• Which beliefs are serving you and which are getting in your way?
• Net Worth, Not Income What is your net worth? (total investments + cash + savings – total debt = net worth)
• Are you living within your means? Or spending tomorrow’s money today?
• Know Your Spending Habits. Do you know where your money goes?
• Fees, Fees, Fees. You could double the size of your portfolio simply by lowering your fees.

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